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By Diane Davis
Aug. 23 — Should the foreign representatives of a defunct Greek telecommunications company be required to add U.S.-based defendants to an ongoing avoidance action in the United Kingdom and litigate all of their claims against all defendants in one forum?
Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York Aug. 22 concluded that resolving the U.K. law claims against U.S.-based and foreign-based defendants in one proceeding would be “clearly superior,” and ordered that the U.K. action should proceed but stayed the U.S. proceeding ( Hosking v. TPG Capital Mgmt., LP (In re Hellas Telecomms (Luxembourg) II SCA, 2016 BL 271482, Bankr. S.D.N.Y., No. 12-10631 (MG), 8/22/16 ).
The foreign representatives/plaintiffs of debtor Hellas Telecommunications (Luxenbourg) II SCA obtained recognition of the debtor's English liquidation proceeding as a foreign main proceeding in the bankruptcy court under Chapter 15 of the Bankruptcy Code. Chapter 15 is designed for the U.S. court to assist an insolvency principally pending in another country.
The plaintiffs then filed an adversary proceeding to avoid and recover an initial €1.57 billion transfer made by the debtor to its parent entity and to avoid and recover €973.7 million of subsequent transfers allegedly made to several defendants and an unnamed class of transferees. The case was originally brought under the New York Debtor and Creditor Law, but later only the unjust enrichment claim survived against the U.S.-based defendants. The case was then amended to allege avoidance claims under the laws of the U.K. where the foreign debtor's recognized foreign main insolvency proceeding is pending.
Subsequently, the plaintiffs filed an avoidance action in the U.K., asserting the same U.K. avoidance claims against the previously dismissed defendants in the U.S. case. The defendants then filed a forum non conveniens motion in this court, arguing that the U.S. proceeding should be dismissed because the plaintiffs commenced the U.K. action and all of the defendants consented to jurisdiction in the U.K.
Glenn focused on the role a bankruptcy court plays in a Chapter 15 case. This case is “ancillary to the foreign main proceeding pending in the U.K.,” the court said, and this court is supposed to “provide assistance and cooperation to the U.K. court.”
A U.S. court shouldn't supplant the U.K. court on matters properly pending before the U.K. court, especially when issues of unsettled U.K. law are involved, the court said. When the original adversary complaint was filed, there wasn't a U.K. action pending, but now that there is one pending, there is an “adequate alternative forum” or a “superior forum” to adjudicate all of the claims against the defendants, the court said. According to the court, having the U.K. law claims against all defendants resolved in one proceeding is superior, avoids the risk of inconsistent results, and leaves the U.K. law claims in the U.K. where the foreign main proceeding is pending.
Although the court granted the defendants' motion to have the case litigated in the U.K. rather than in the U.S. courts, rather than dismiss the U.S. action, the court ordered a stay of the action pending the conclusion of the U.S. action. If the U.K. action results in a judgment against the U.S.-based defendants, the stay may be lifted for any proceedings seeking enforcement of the judgment, the court said. The court also imposed specific conditions upon the defendants as a prerequisite to staying the U.S. action.
Andrew Rosenblatt, Chadbourne & Parke LLP, New York, N.Y., represented plaintiffs against all defendants except Deutsche Bank AG; Alan A.B. McDowell, Schwartz Sladkus Reich Greenberg Atlas LLP, New York, N.Y., represented plaintiffs against Deutsche Bank AG; Paul M. O'Connor, III, Kasowitz, Benson, Torres & Friedman LLP, New York, N.Y., represented defendants TPG; Robert S. Fischler, Ropes & Gray LLP, New York, N.Y., represented defendant Apax Partners, L.P.; Charles A. Gilman, Cahill Gordon & Reindel LLP, New York, N.Y., represented defendant Deutsche Bank AG; and Wayne S. Flick, Latham & Watkins LLP, Los Angeles, represented defendants TCW.
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